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Long Leases, including Service Charge

A long lease is usually for a flat although they can also be for houses. They provide for a very long term tenancy, usually for more than 99 years. A long lease can be bought and sold on the open market and usually are. Long leases will characteristically provide for a low ground rent and the payment of a service charge by the leaseholder to the freeholder who owns the property (or a management company acting on their behalf) for the upkeep of the building.

There is no one standard long lease type and they can vary dramatically. So if you are just looking for advice or in the midst of a dispute, then we can provide practical and comprehensive advice.

Services

Long leases include provisions by the freeholder to repair, maintain and insure the building and by the leaseholder to pay their share of the cost in the form of a service charge. Freeholders must follow certain mandatory requirements if they wish to recover the cost and before leaseholders pay the cost they will want to ensure that the service charge is reasonable and of a reasonable standard.

Our services include:

– Extension of long lease, including issues regarding marriage value;

– Statutory right to extend the lease pursuant to the Leasehold Reform Housing and Urban Development Act 1993;

– Setting and recovery of service charges, including the sinking fund;

– Challenging the service charges;

– Consultation process for qualifying works;

– Statutory Controls on service charge demands;

– Accounting for the charges;

– Forfeiture and Possession; and

– Dispute resolution.

This is not an exhaustive list so if you need to talk to a lawyer, our team are on hand to give clear advice on practical solutions.

We also advise on the leaseholder’s right upon qualification, to compel the sale of the freehold of the building or part of the building. In that case you will need our Enfranchisement service.

Pitfalls

With solutions in mind, we hope the following list of common pitfalls will be of some use:

Extent of freeholder’s obligations to repair

Freeholders may want to minimise their exposure to repair costs however, they will also need to ensure that their investment does not depreciate due to dilapidations.

Extent of leaseholder’s obligations to repair

A leaseholder’s obligations will be set out in the lease. Leaseholders are therefore, advised to familiarise themselves with the obligations to ensure that they can meet them.

Ground Rent

This is an additional annual cost that leaseholders should ensure that they can meet. A low ground rent can affect the investment value of the property. Freeholder’s will therefore want to ensure the ground rent is set at a market rent.

Administrative functions and cost

This is also an additional cost that leaseholders should ensure that they can meet. Freeholders may not have the time to commit to managing the property on a day to day basis. Subject to the long lease terms, third party agents could be employed to undertake the management at a reasonable cost.

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